Group-Term Life

Group-Term Life insurance coverage, otherwise known as (GTL), is a relatively common fringe benefit provided to employees and/or their dependents. If the employer pays the premiums for the coverage, the value of the coverage over a certain amount becomes taxable to the employee and must be reported through payroll.

Here's the skinny on the coverage limits to watch out for:

Employee coverage over $50,000,

Dependent coverage over $2,000.

For coverage exceeding these limits, the IRS provides a formula for employers to use in calculating the taxable amount of the coverage so that the compensation value can be appropriately taxed and reported. For every $1,000 of coverage over the limit, there is an age-banded rate at which the coverage is taxed -- the older the employee, the higher the rate per $1,000.

GTL benefits are taxable for all employer and employee taxes and can be reported payroll-by-payroll throughout the year or in a lump sum at the end of the year. If reporting the benefits in an annual lump sum, the employee's age at the end of the year must be used for the calculation. If reporting payroll-by-payroll, iSolved can handle the calculations automatically (contact customerservice@dominionpayroll.com for more info).